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Royalty Trusts: Another Attractive Investment
2007-04-06 07:11:00
Trust is a very important term in the world of investing. To put it in simple words, a trust is nothing but an arrangement whereby money or property is owned and managed by an individual or entity for the benefit of another. The money is invested in companies with operating assets. These assets produce income which is eventually passed to the investors. These trusts are neither stocks nor bonds but are investment trusts. An investment trust that holds ownership of an asset and pass the income earned to investors is called a securitization or an asset-backed security.Royal ty TrustsRoyalty trusts buy the right to royalties on the production and sales of a natural resource company and pass on the profits to trust unit holders. Royalty trusts typically own oil or natural gas wells, or the mineral rights of wells.Royalty trusts are found in Canada and the United States. Canadian royalty trusts, called CanRoys, typically trade on the Toronto Stock Exchange, while some of the larger trus...
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Selling Your Investment: Five Mistakes to Avoid
2007-04-04 05:49:00
When the security you bought has increased in value, you can make a profit over it, provided you sell the security. How much profits you reaped-in depends not on the current price of the security, but at what price did you sell the security. Unfortunately, many investors sell based on emotional factors, making one of several mistakes.I have listed five mistakes most investors make when it comes to selling. Along with that i will also discuss how to avoid those mistakes.1. Holding on to an investment with a lossSay you bought stocks worth $10,000, at $100/share. Few days after buying them, the stock price dropped to $90/share. You decide to hold on to the investment till the investment atleast gets back to a break-even level of $100/share.Problem: It is generally difficult for investors to sell off their investment with a loss. They would rather prefer to wait until they see some positive numbers. However, that may never happen or may take a long time to do so.Solution: You should re...
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Dollar Cost Average: Stay away from Predicting
2007-04-01 02:58:00
The truth about making money in the stock market is buy low and sell high. Quite simple eh ! But hold on, how do you really know when the market has hit bottom ? Can an investor really predict the bottom ? As a matter of fact hedge fund managers, mutual fund managers, private investment managers, market gurus, CEOs and analysts can't predict the bottom, nor can you and me. So how should we approach this problem ? It is actually a tough one. Predicting if the market has reached its bottom it not that simple. However using the Dollar Cost Average investing technique, you could protect yourself in a falling market. Let us learn how.What is Dollar Cost Average (DCA)Dollar Cost Average is simply putting a X amount of money each month into an investment such as a stock, index fund or mutual fund. Most banks will even set up a monthly automatic-withdrawals service. Dollar Cost Average is also ideal for the investor who doesn't have that big lump sum at the start but can invest small amo...
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How to Determine Your Returns in the Stock Market
2007-03-31 02:46:00
With all of the volatility in the stock market over the past several years, it can be difficult to determine how to devise an investment strategy to maximize your returns. To help you determine a reasonable rate of return to expect on your stock investments, it might be helpful to review some facts about the stock market.Historical ReturnsStock market is a one place where you can make alot of money very fast as well as lose money at the same pace. Most of us make money on some stocks and lose on some others. What matters in the end is what returns can you expect on an annual basis. If you look at the history,1926 - 2004, the average return from the stock market was 10.4%1955 - 2004, the average return from the stock market was 10.9%1980 - 2004, the average return from the stock market was 13.5%1995 - 2004, the average return from the stock market was 12.1%The stock market's historical return can change dramatically depending on the period considered. But over a period of time, on a...
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Bankruptcy: Good, Bad and the Ugly
2007-03-28 10:58:00
When a person or a firm is unable to pay their ever-increasing debts, they can file for bankruptcy. Let us say Mr X filed for bankruptcy. This means Mr X's existing assets will be liquidated and he will be relieved of any liability. The reason why most people file bankruptcy is that their debts have reached a level where they cannot pay them back and only way out of it is a fresh start.Last year in U.S. more than a million filed for bankruptcy. That number will increase this year due toBad housing market (which leads to foreclosures & delinquencies)Bear stock market (with housing & subprime lending stocks leading the way)Possibility of a recession (as per Greenspan's comment)Energy prices (ever increasing oil prices putting extra burden on everyone)Increased inflation (driving up the prices of goods and services)Americans save less money leading to high debt to income ratioTypes of Bank ruptcy Chapter 7: Mr X can file for Chapter 7, which basically means that all his assets will...
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Subprime Lenders: Screwed Real Bad
2007-03-15 06:00:00
Last few days the market is full of news about how the number of foreclosures are increasing around U.S. and how badly subprime lenders are screwed. I do not want to reiterate the same point again and again. Instead i will list a few interesting pointers/takeaways from this whole episode. But just before doing that for those who do not know what subprime is...What is a subprime loan ? This is a loan to someone with a bad credit history. These people pay higher interest rates, earning more money for lenders, so long as the mortgage payments keep coming.Delinquencies & ForeclosuresThe delinquency rate for one-to-four-family houses rose to 4.95% of all loans outstanding compared with 4.67% during the 3rd quarter. The North Central region had an overall delinquency rate of 5.68%, the South 5.71%, the Northeast 4.59% and the West 3.18%. A record high number of homeowners faced a serious threat of foreclosure during the 4th quarter of 2006. Foreclosures were highest in the North Central r...
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Highest Rated Sectors: Did Analyst Get It Right ?
2007-03-13 09:23:00
What are we looking at here ? The most popular S&P 1500 groups. The table is self explanatory, so i will just point out few interesting things. The first column is the list of sectors most recommended by the Wall Street Analyst . The sixth column gives the overall percentage of buy recommendation. The last column is the stock that is most favored in that particular sector. As you can see Contruction Materials topped the table with 61.1% buy recommendation. Analyst are most bullish on Vulcan Materials Company VMC.Construction Material SectorVulcan Materials Company VMC is currently trading at $116.01P/E = 24.76 (ranked #2 in the construction materials sector)EPS = 4.69PEG =2.31 (ranked #2)Dividend = 1.50% (ranked #9)Market Capital = $11.02 billion (ranked #2)Analyst recommendation of 1.4/5.0All in all, pretty impressive record. Add to that their 1-year return was whooping +49.75%. No wonder analyst love it. Construction Raw Materials sector performance ? Last one year returns was +25%...
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China Gets Aggressive With Forex Reserves
2007-03-13 05:40:00
Did you know China has more than $1 trillion in foreign currency reserves after posting huge trade surpluses year after year !! Add to that China's reserves is growing at $20 billion every month !! For China, that is simply spectacular, for U.S. well...sigh*So what does China do with the 1$ trillion ? Right now they have invested approximately 75% in low-yielding U.S. Treasury securities and other dollar-denominated assets. The rest in euros and a small amount in yen. Returns on this investment has been less than 3% last year. Not quite exciting. But that is going to change....Need a ChangeChina now plans to make better use of their reserves and reap in more profits. One way to do that is create an investment company, and that is exactly what they are upto. China will soon create one of the world's largest investment funds, with diversification in global stocks, bonds and commodities markets. It is estimated that they will allocate somewhere between $200 to $400 billion to this ...
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What is ExxonMobile Upto
2007-03-12 00:51:00
Last year Exxon Mobi l (XOM) produced about 4.2 million barrels of oil/day. Is that enough ? Probably not. To add to their existing production volume, ExxonMobil has decided to invest in more than 20 new projects around the world over the next 3 years. This would bring in an additional 1 million barrels of oil/day to its volumes at peak production.Capital SpendingCapital spending is projected to be around $20 billion/year through the rest of this decade. Isnt this something to worry about ? $20 billion/year for an extra one million barrels a day in production ? So what does Exxon have to say about that ? Probably nothing...Just that Exxon's volume will keep growing through the end of the decade.So where does Exxon plan to invest ?Exxon has an ownership interest in 40 refineries located in 20 countries. 20 new projects the company plans to invest in will be mature markets such as North America, Australia and the North Sea, as well as growth areas like the Middle East, Russia and West...
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Citigroup On a Buying Spree
2007-03-11 01:49:00
Citigroup (C) bought the largest online bank in the world, Egg Banking at $ 1.13 billion. Citi got in return 3 million credit card customer and $ 18.6 billion in assets. Citi's total asset stands at $1.8 trillion.So did Citigroup get a great deal ? In 2004, Bank of America (BAC) paid $48 billion for FleetBoston which had $ 196 billion in assets, J.P. Morgan Chase (JPM) paid $58 billion for Bank One which had $320 billion in assets, Wachovia (WB) paid $14.3 billion for SouthTrust which had $54 billion in assets. In 2005, Bank of America paid $35 billon for MBNA which had $ 123 billion in credit loans. In 2006, Wachovia paid $25B for Golden West which had $125 billion in assets, Regions Financial (RF) paid $10 billion for AmSouth which had $58 billion in assets.When you compare all the recent mergers on cash paid/dollar assets acquired, it seems like Citigroup got a very good deal with minimum risk. It is acquiring an online bank with online assets, which can be combined with Citi?s...
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Foreign Investment in United States
2007-03-09 03:50:04
In 2004, the total foreign direct investment (FDI) in the United States (U.S.) stood at $1.5 trillion, equivalent to $2.7 trillion in today's market value which represents approximately 10% of the total current market value of all publicly traded companies in U.S.Geographic BreakdownEuropean companies made up 65-70% of direct investment in the U.S., with United Kingdom (UK) leading the way. 1/3rd of the total investment from Europe came from UK, with $250 billion invested in 2004. UK, Germany, Netherlands and France were the top four investors in U.S. in that particular order.Asian and the Pacific firms had the next highest level of investment in the U.S., at approximately $219 billion in 2004. Japan accounted for 75% of the investment. Chinese & Indian investments in 2004 were minimal. However that is bound to change with a number of acquistions by Chinese and Indian firms.Canada finished in the third spot.Direct investment from Latin American investors totals $86 billion. The bi...
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Are You in Sync with Ford ?
2007-03-07 15:48:02
The entire auto industry year-to-year sales dropped 0.5%. The total market share of the U.S. Top 3 fell to 54% from 56.6%, where as Asian automakers up their share from 37% to 39.4%. Facts: Vehicle Sales Year to YearAsian Top 3 -> Toyota (TM) = +12%, Honda (HMC) = +3.2%, Nissan (NSANY) = +1.2%US Top 3 -> General Motors (GM) = + 3.4%, DaimlerChrysler (DCX) = -7.7%, Ford Motor (F) = - 13%General Motors was the only US Top 3 with positive sales of +3.4% helped by a strong launch of their redesigned models. General Motors managed to increase its market share 1% to 24.6% total. On the other hand Ford Motors lost -13% in sales. Toyota Motor sales were in double digits.Ford to Sync Research shows consumers are picking brands with strong records for quality and technical innovation. Ford has decided to respond to this research. Ford will work with Microsoft (MSFT) to develop a built-in audio system called Sync for 12 of Ford's models. Features include in-car communications and entertainme...
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Recent Developments & Rants
2007-03-07 15:48:02
Microsoft gets hold of Medstory. Microsoft (MSFT) is purchasing Medstory Inc., a health search engine. Medstory enables users to search complex health and medical related topics on the web intelligently. Some noteworthy features about Medstory is their ability to filter out non-health results, provide effective granularity, allow audio & video search and their killer app. Medstory's approach is to not only provide a list of web pages but to synthesize the meaning of every user search in the context of health and medicine, and then share this knowledge with the user to help refine and guide their search.Medstory will become the second acquisition for Microsoft's Health Solutions Group, which bought Azyxxi, a maker of healthcare software that displays patient information last year.Rant : There seems to be an increasing demand for online healthcare information driven by aging baby boomers. Filtering out non health-related searches makes getting the right information that much...
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Sony Playstation 3: Two Thorns Away From Glory
2007-03-07 15:48:02
Sony Corp (SNE) creator of Play station 3 has two thorns in their path to glory.Nintendo Ltd (NTDOY) creator of WiiMicrosoft (MSFT) creator of XBox 360PS3 has a hard drive to store game data and music and can play DVDs using Sony's Blu-ray high definition technology. PS3 sales took off very well in the early stage. However with the advent of Nintendo's Wii which features a unique motion-sensitive controller and Microsoft's XBox 360 which offers an extensive system for online play and high percentage availability, PS3 sales have been struggling ever since.Problem with PS3Gamers and analysts have praised PS3 graphics, but their high prices, shortage of console and weak line-up of games have raised concerns. Sony says that the Playstation 3 shortage will be eliminated by April/May, with another 2 million units on their way to the United States. Gaming sites claim of unsold PS3s. In response Sony CEO said that in many places the games are sold out. They plan to fill shelves across Un...
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Inflation: The Good, The Bad and The Ugly
2007-03-07 15:48:02
In the world of economics, inflation is one tricky term. Everyone knows that prices go up over time. 60 years back you could buy a loaf of bread for $0.15, which now costs around $2 - $3. However not everyone understands the forces behind inflation. So let us find out. What is Inflation Inflation refers to a general rise in prices for goods and services measured against a standard level of purchasing power. As inflation rises, every dollar you own buys a smaller percentage of a good or service. For example, if the inflation rate is 5% annually, a good or service costing $100 will cost $105 in a year. (Note: The goal for most developed countries has been to sustain an inflation rate of 2-3%) There are few variations of inflation you need to know.Deflation: When there is a general fall in prices for goods and services. This is opposite of inflation.Hyperinflation: When there is sharp rise of inflation. This could lead to a breakdown of the monetary system.Stagflation: When economy bec...
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Hugo Chávez: Nationalize Nationalize
2007-03-07 15:48:02
Venezuelan President Hugo Chávez recently announced he would nationalize power utilities and the country's biggest telecommunications firm CANTV VNT. After the announcement the share prices of CANTV tanked from trading around $20/share to $12/share. Ouch !!!He also mentioned that he plans to nationalize the entire energy sector indicating there are more targets for take-over. But he said he would permit foreign firms to hold minority stakes in energy deals. It was not immediately clear whether he intends to nationalize the whole sector or moves against specific projects or companies.Venezuela will have to judge how closely private firms must be connected to the country's oilfields, refineries, pipelines, gasoline stations and coal mines to count as targets for nationalization.Companies at StakeHuge oil service companies such as Halliburton HAL and Schlumberger SLB operate in Venezuela but Chávez gave no indication whether deals involving such businesses were now in his sights. Chá...
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State GDP = Country GDP
2007-03-07 15:48:02
Fascinating stuff: This is an amazing map of the United Stat e s. Each state's economic output is analogized to another country's GDP Few of the notable countries missing are U.K., Japan, Germany, China, Italy and India.
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$140 trillion in Assets !!!
2007-03-07 15:48:02
Yeah you heard me. World assets were all time high at $140 trillion (includes stocks, bonds and other financial assets) in 2005. McKinsey & Co. conducted a study mapping financial assets around the globe and seek the flow of these assets from region to region.This study helps you understand where the investors as well as the banks are investing. It is clearly indicating that investors and banks are spreading their investment portfolio in diverse broader markets.U.S is still the leader, taking in about 85% of the flow from countries that are net exporters of capital (like Japan, China and Middle East OPEC countries). This means that of the all the saving that citizens world-wide are willing to put outside their own country, the U.S gets 85% of it.
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Is South America the Answer ?
2007-03-07 15:48:02
With emerging markets grabbing investor attention, many are turning their focus towards South America n markets. Strong exports, high commodity prices and increased investments have been contributing factors to growth within many of the Latin American markets. As a result, many companies are working to capitalize across a variety of sectors such as DVD manufacturer Infosmart Group, Inc. IFSG in the digital media and tech market, ZAP ZAAP and Rotoblock Corporation ROTB taking advantage of the growing demand for alternative and renewable transportation, as well as GoldenPeaks ResourcesLtd. GL and other mining companies pursuing resource plays within Argentina and surrounding areas. Lets take an example of Brazil to understand where does the South America n market stand. Tech & Media MarketComputer sales increased more than 20% in 2006. This growth can be attributed to a variety of factors such as government incentives, a high level of Internet use and overall economic growth leading to...
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How Did They Perform !!
2007-03-07 15:48:02
Burnt burnt burnt...!! Isnt it weird that even after you have a strong feeling about the direction of the market you go ahead a make some real silly trades ? How many times have you got sucked into buying a stock thinking its reached its bottom and the prices will rise from here, but it never does. Instead it keeps falling till the sharks eat every innocent investor up for grabs. What surprises me is that i made 3 important points last night and all of them turned out true.Tech sector might be a risky bet considering the current trend.Metal prices will see some positive number.IM and MU are value stocks and will see better numbers in the longer run. Stocks traded lower as the market took a hit from another sell-off in Technology sector. Oil prices again took a drop at point slipping below $50 and the Feds showed no sign of reducing interest rates. Disappointing Q2 guidance from Apple and drop in sale and profits from Intel brought the Technology and Computer Hardware tumbling down...
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How Did They Perform !!
2007-03-07 15:48:02
An amazing reversal of roles from yesterday. Energy sector made an upward movement where as the Technology and Transportation sector saw a downslide. Stocks closed lower today as mixed earnings and economic data left investors questioning valuations and earnings prospects, especially in the Technology sector.Intel INTC was leading the downward slant in the early morning after posting a not so-good earnings and bringing the others along with it. Cisco Systems CSCO also had another bad run dropping by 3.78%Fed's report released today showed inflation in control with modest pace growth. Oil prices were also the focus among investors yet again. Cold weather forecasts have renewed enthusiasm to buy the commodity which lead to oil closing higher than previous day.ANSW +0.08 (0.66%)CBK +0.15 (0.73%)LQDT +0.09 (0.50%)NEXT -0.25 (-2.18%) STST -0.15 (-0.69%)WIT +0.66 (3.86%)Net Gain of +2.88%
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Seven Companies Announce Buyback
2007-03-07 15:48:02
When a company announces a buyback, it means that the company is going out and buying shares of its own company on the open market. This is generally very bullish for stocks, since it shows confidence by executives in their own companies, reduces the number of shares outstanding. With the reduction of shares in the market the demand of the stock normally goes up. This is also good news for the existing shareholders since the earnings and dividends will be split up among fewer shares.The 7 companies that announced buyback areBank of America BACCypress Semiconductor CYEast West Bancorp EWBCeBay EBAYFreightCar America RAILRome Bancorp ROMEVarian VARI
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A Day To Remember: The Great Wall Falls
2007-02-28 09:46:01
Everyone knows that the market goes through a correction every once a while. The problem is not everyone knows when. Stocks slumped Tuesday 27th Feb on worries about economic growth at home and abroad especially China.What HappenedThe Dow dropped 416.02 points equivalent to 3.29 %, its biggest one-day point loss in nearly 5 & 1/2 years. The S&P 500 tumbled about 3.5 % and the Nasdaq skidded 3.9 %.What Caused ItChinese market dropped 9 % on concerns that the government was looking to crack down on market speculation that has driven Chinese stocks to record highs. There are were also rumors that China is going to impose a high capital gain tax on stock investments. Other Asian markets slumped in tandem. European shares also tumbled. Former Federal Reserve Chairman Alan Greenspan said that U.S. economy might slip into a recession by the end of the year.Economic indicators showed the biggest monthly drop in new orders for nondefense durable goods, items meant to last 3 years or mor...
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Housing boom or bust ??
2007-02-27 21:45:02
Strong housing sales is an indication of strong economy. With increase in interest rates, the mortage rates also are up.Rule of thumb: High mortage rates = Slow housing salePending sales of existing U.S. homes fell 0.5 percent in November but held above the low hit in July, suggesting the housing market is stabilizing.The Pending Home Sales Index is pointing toward fairly stable home sales in the near future. Home sales climbed the two months after September.The index covers pending sales of existing single-family units, condominiums and co-ops. A home sale is pending when a contract has been signed but the transaction has not closed.Shares of homebuilders is all down, and i do not recommend holding it this qtr. Some of the stocks make for good shorts like Toll Brothers (TOL), DR Horton (DHI), Pulte Homes (PHM), Restoration Hardware Inc (RSTO), Home Solutions of America Inc (HSOA)I am bearish about Real Estate/Construction stocks this quarter, but the second half of 2007 looks more ...
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More facts about housing...
2007-02-27 21:45:02
Housing activity is a function of several factors: Rates, the overall economy, supply, population growth, rental prices, sentiment, speculation, liquidity (easy financing terms, loans, mortgages) Over the past 5 years, rates dropped, supply expanded, population expanded, prices rose. That's normal. But then rates plummeted even further, prices rose more quickly. That is where we saw crazy boom. Now that we are seeing inflation problems, the Feds have raised rates and that is why we are seeing drop in prices.Lets have a look at few interesting facts about housing/real estate. California is hit the hardest in falling home values in the nation. San Diego will drop more than 13% on average in 2007, Los Angeles more than 11% and Miami will have a 13.6% drop.However on the good side, Washington state and Utah are experiencing massive areas of growth. Texas is undergoing the largest growth in its history since alot of people are moving in from New Orleans due to Hurricane Katrina.In Cal...
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Splits v/s Buybacks
2007-02-27 21:45:02
I have been monitoring this stock for a while, till yesterday it was priced around 10$ per share. Today it is trading around $5. What happened ? Did the shorts win big time today. But there is no bad news ? As you read up more about the stock you realise the company has opted to split its shares. So what is splits, and why do companies split their stock price ? If this interests you, keep reading...What are Split s ?A company whose stock is performing very well may opt to split its shares, distributing additional shares to existing shareholders. The most common split is 2:1, in which each share becomes two shares. The price per share immediately changes to half. Reverse split is when the number of shares decreases, ie 1:2Why do companies opt for splits ?A company will usually decide to split its stock if the price of the stock gets very high. High stock prices are problematic for companies because they make it seem as though the stock is too expensive. By splitting a stock, companies...
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Gold rush....
2007-02-27 21:45:02
Love it, hate it but can't ignore it. I am talking about Gold . Like i mentioned in my early blog, when the dollar becomes stronger, gold will see a downslide. This was true this week with dropping oil prices and resurgent dollar. Gold prices tend to fall when energy prices drop, as the yellow metal is generally seen as a hedge against oil-led inflation.Gold is trading around 606$. The dollar climbed for a second straight day, gaining support from a recent run of upbeat economic data that has lowered expectations the Federal Reserve may cut interest rates in coming months. Recent economic data show economy is slowing, but there is no sign of sharp slowdown.According to commodity experts/analyst, gold will be higher in the latter part of the year, but short-term sentiments are a bit shaky. It is believed that gold will be in demand with the unresolved situation in Iran and tension in the Middle East.Silver is trading around 12.60$, with platinum around $1,120 and Palladium laround $3...
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Forex: Do You Understand Currency Movement ?
2007-02-27 21:45:02
There used to be a time when trading on the currency exchange (foreign exchange market or forex) was not for everyone. It used to be a domain for government central banks, commercial banks, investment banks, hedge funds and huge international corporation. However with the advent of the electronic trading networks, trading in forex is now more accessible than ever. The forex offers trading 24-hours a day, 5 days a week, and the daily dollar volume of currencies traded in the currency market exceeds $1.4 trillion, making it the largest and most liquid market in the world.Forex is generally a low volatile market. Currency fluctuations are usually very small. Most high risk investors & speculators use leverage (which is possible due to high liquidity) to increase the profit margins. For example, it is possible for an investor to control a position of $100,000 by putting down as little as $1,000 up front and borrowing the remainder from his or her broker.The movement of currency prices a...
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Understanding IPOs
2007-02-27 21:45:02
Initial Public Offerings (IPOs) are the first time a company sells its stock to the public. Sometimes IPOs make huge first-day gains like Chipotle Mexican Grill (CMG) which was offered at $22/share and ended their first day of trading at $44/share. Wow. However there are times when the market is overall bearish and the IPO will flop like in the case of Vonage Corp (VG) which was offered at $17/share but has now dropped to around $6.5/share.Unfortunately more than ever individual investors dont get access to the stock at initial offered price. Its the mighty institutional investors who do. By the time the general public can trade the stock, most of its first-day gains have already been made. However, a knowledgable investor should still watch the IPO market, because this is the first opportunity to buy these stocks. Reasons for an IPOWhen a privately held company needs to raise additional capital, it can either take on debt or sell partial ownership. When the company decides to sel...
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Which sector are you in ??
2007-02-27 21:45:02
There are alot of stocks to invest in ?How do you decide which one to pick ?The best way to start is to decide which sectors to invest in. Decide for youself which sector you think you like and is going to do well in the near future. Once you pick the sectors you like, look into sub-sectors. Now inside this sub-sector look for companies with good EPS, P/E, PEG and market capital.Everyone should make a like it - dislike it list, and STICK to it.I will go through few of my personal ones.Like it...I like Gold/Silver stocks (metal prices might swing, but the love for gold doesnt)I like Tech stocks (companies with unique products, brand, outsourced cost cutting operation)I like Semiconductor stocks (manufacturing chips for prefered consumer products)I like Health Care stocks (with strong sales)I like Real Estate stocks (but i am bearish about them this qtr)I like High Dividend stocks (the divendend can compensate against any downward movement)I like Emerging Market stocks (way too much g...